Economy Watch: Homeownership Still on Downward Slide

The Census Bureau reported that the U.S. home ownership rate was 65.4 percent of all households during the first quarter of 2012, a contraction of 0.6 percentage points since the fourth quarter of last year, and down from 66.4 percent a year ago.

The Census Bureau reported on Monday that the U.S. home ownership rate was 65.4 percent of all households during the first quarter of 2012, a contraction of 0.6 percentage points since the fourth quarter of last year, and down from 66.4 percent a year ago. The rate, which has been consistently driven down for a few years by homeowners who lost their homes, plus many young families staying out of the for-sale market when forming households, reached a high of 69.2 percent in 2004, on the upward side of the housing bubble.

As a natural consequence of ownership shrinkage, apartment and rental housing vacancies are shrinking, too. The bureau said that rental-property vacancies stood at 8.8 percent during the first quarter of this year, the lowest level in about a decade. Rents for dwelling space are up to a median of $721 a month, a post-recession high.

Separately, the Federal Reserve reported on Monday that most banks it surveyed said that their mortgage lending standards were still tight. For a would-be borrower with a FICO score of less than 620 offering to pony up a 10 percent down payment, fully 43 of 52 surveyed banks said they were less likely to offer a mortgage under such circumstances than they would have been in 2006. Even at a down payment of 20 percent, 37 of the banks said they were less likely to pull the trigger on the loan (but then again, 2006 may not be the best year for comparison; fogging a mirror often was enough to qualify for a loan in those days).

Income edges up

Personal income increased $50.3 billion, or 0.4 percent, and disposable personal income—the kind of income consumers can spend on whatever they want, as opposed to what they need—increased $42.5 billion, or 0.4 percent, in March, according to the Bureau of Economic Analysis on Monday. Consumers took some of that increase and went out to spend: personal spending increased $29.6 billion for the month, or 0.3 percent, the BEA also reported.

Personal savings, which is disposal income minus personal outlays, was $450.4 billion in March, compared with $440.3 billion in February. The personal saving rate, that is, personal savings as a percentage of disposable income, was 3.8 percent in March, compared with 3.7 percent in February. Consumer savings patterns, in other words, were essentially stuck in neutral for the moment.

Spain drops into expected recession

Though hardly a surprise, it’s now official: Spain has entered the second downturn of a double-dip recession. Spain’s National Statistics Institute reported on Monday that the economy contracted 0.4 percent during the first quarter of the year, coming on the heels of a shrinking of 0.3 percent in the fourth quarter of 2011. Last week, Standard & Poor’s downgraded Spanish sovereign debt, and on Monday the ratings agency downgraded the debt of 11 of Spain’s banks. When it rains, it pours.

The Spanish government, in the economic plan it’s sending to the European Commission for approval, predicts that the country’s economy will contract by 1.7 percent in 2012, but grow again in 2013–by all of 0.2 percent. Even that pessimistic outlook is considered too optimistic by many economists, since the country has an unemployment rate twice as high as anywhere else in the euro zone, nearly 25 percent.

Wall Street reacted to the news from Spain with characteristic lemming-like movements, but ultimately the declines weren’t that much. The Dow Jones Industrial Average lost 14.68 percent, or 0.11 percent, while the S&P 500 was down 0.39 percent and the Nasdaq declined 0.74 percent.